FSCS funding review will look at sub-classes
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FSA chief executive Hector Sants has confirmed that the way Financial Services Compensation Scheme sub-classes are made up will be looked at as part of the proposed review of FSCS funding.
Earlier this month, Informed Choice submitted an open letter and petition to Sants and Treasury financial secretary Mark Hoban calling for urgent reform of the current FSCS funding model.
The petition closed with 678 signatures.
In response Sants confirms that formal consultation on FSCS funding had been postponed due to the move to the new regulatory framework.
On the way in which the sub-classes are structured Sants says: “The investment intermediation sub-class was established when we last reviewed the FSCS funding model. It covers the activities of advising, arranging or dealing in investments.
“While firms in this sub-class may have different business models, we concluded that there was sufficient affinity between the firms to include them in the same sub-class. When we consult on the review of FSCS funding, we intend to discuss the composition of the classes.”
The FSA last carried out a review of the funding model in 2007.
In its letter, Informed Choice also raised the issue of what liability adviser firms hold who sold a failed firm’s investment products.
In response Sants says: “Please be aware that we will take further regulatory action in respect of individual live distributor firms where we consider it appropriate. However, we cannot disclose to you the details of any action the FSA is taking, or envisages taking, due to confidentiality restrictions.”
Posting on the FSCS action group website, set up by Informed Choice, managing director Martin Bamford says: “I appreciate Hector Sants taking the time to respond to our petition and demonstrate that the FSA understands the very real concerns of IFA business owners.
“Perhaps the best we can hope for now is a more effective regulator in the shape of the Financial Conduct Authority, taking earlier and more robust action where they identify emerging risks. I remain optimistic that we will eventually see reform when it comes to the funding of the FSCS.
“Thank you to everyone who has supported this campaign.”
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Readers' comments (2)
Green Eyed Monster | 23 Feb 2011 10:06 am
Reviewing the sub classes is not the answer.
The FCA should aim to scrap the FSCS as soon as possible, and focus on finding a way for each client to protect himself from mis-selling for his lifetime, or the lifetime of the product. A point of sale, single premium approach would protect the client without having to have a whip round among the surviving firms to compensate him. The current situation will eventually lead to the complete demise of the intermediary sector. A diminishing number of firms cannot cope with the increasing level of compensation. It is self evident. If Mr Sants is serious about protecting the client he must scrap the FSCs and replace it with an insurance based scheme to protect the investing public.
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Mr Fisher | 23 Feb 2011 10:25 am
What he means is - we have gone back to the arcetechets of this Oxera given them another load of money to review the mess they created last time.
i agree with GYM the FSCS has to go and product premium has to be in place.
I have written to TSC and given my solution although far too simple and cost effective so it won't happen as these people just thrive on cost driven and complicated regimes that when placed under stress collapse. .
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